BOK to take action to cope with foreign monetary policy changes

The chief of South Korea's central bank vowed Tuesday to take "appropriate" steps amid signs that major economies could change their monetary policies going forward.

Last month, the U.S. Federal Reserve raised key interest rates by 0.25 percentage point, marking up the target range for the federal funds rate to 1-1.25 percent.

The move marked the second time the Fed raised rates this year after the first hike in March. The Fed also said it plans to reduce its securities holdings, a move that could spur rates to rise further.

Last week, European Central Bank President Mario Draghi hinted at scaling back quantitative easing for the first time at a forum that included governors of central banks of major economies, according to Bank of Korea Gov. Lee Ju-yeo.

The developments, Lee said, mean the current tone of monetary policies of advanced countries -- low interests and quantitative easing -- could change in the future.

The participants at the forum said emerging countries should be thoroughly prepared for any unexpected side effects caused by the reduction in massive amounts of liquidity in the international financial markets, the BOK chief said.

"The Bank of Korea plans to respond appropriately by closely monitoring the change of advanced countries' monetary policies and the flow of international funds," Lee said in a meeting with several economic experts in Seoul.

Last month, Lee said the BOK may take a monetary tightening approach if the economy shows signs of a robust recovery.

In May, the BOK unanimously voted to keep the key rate at 1.25 percent, extending its wait-and-see approach for the 11th consecutive month. (Yonhap)